California’s housing market is closely tied to jobs,
employment, and incomes for the obvious reasons. With a national
unemployment rate of nearly 10 percent and well over 8 million jobs lost
since the start of the recession, and with a statewide rate of almost 13
percent, many people have questions about employment and unemployment. So
what does the unemployment rate really mean?

The unemployment rate is derived from a national survey
of households and is conducted U.S. Department of Labor, Bureau of Labor
Statistics (BLS). Based on the survey results, a person falls in one of
three categories: employed, unemployed, or not a part of the labor force.
The labor force is the sum of employed and unemployed persons. Someone is
defined as unemployed if he or she is unwillingly out of work but still
looking for a job. The unemployment rate is number of unemployed as a
percentage of the total labor force, and was 9.7 percent for the US in
March 2010.

That rate may be referred to as the headline
unemployment rate, but there are broader measures of unemployment which
include the underemployed and discouraged workers. Underemployed workers
are included among the employed numbers, but are individuals who would like
to work more hours than they currently work. Discouraged workers have
stopped looking for work because they just could not find a job. By
definition, they are not in the headline unemployment rate because they are
not actively looking for work. Taking these individuals into account along
with those who make up the headline rate defines a more comprehensive view
of labor market health that includes the unemployed, underemployed, and
discouraged workers (see figure). For March 2010, that rate was 16.9
percent, 7 percent higher than the headline rate. This broader measure of
unemployment tracks closely with the headline measure that is so much a
part of the commentary on the economy.

Because more individuals begin to look for work as the
economy recovers, improvements in the unemployment rate and the labor
market typically lag gains that appear in other economic indicators. So
while the Great Recession may have already ended, it will take some time
before the unemployment rate comes down.